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Xcel Energy seeks rate increase to offset higher costs, lower usage

Higher costs, lower usage prompts request

The average residential customer of Xcel Energy in North Dakota would see a $7.34 increase in monthly electricity costs under a $19.2 million rate hike request outlined to the North Dakota Public Service Commission Thursday.

The PSC held two public input sessions Thursday, in advance of a more formal hearing in July. Commissioners could reach a decision this fall, allowing any new rate to take effect next year.

In the meantime, Xcel imposed an interim rate increase on Jan. 5 to collect $16.4 million this year, although it proposes to reduce that amount by $3 million due to a planned change in the rate request before the PSC. The company is in the process of revising its rate increase request downward from the original $22.2 million filed last November.

The interim rates would be refunded if the request is denied or partially refunded if approved rates are more limited in scope than requested.

“When it comes to affordability, we can tell customers that after adjusting for inflation, our average rates today are slightly lower than they were almost 30 years ago,” said David Sederquist, senior regulatory consultant for Xcel. “Xcel Energy has been able to keep its average annual increase at 1.9%, which is below the average rate of inflation of 2.2% over the same 27-year period.”

Residential electric rates in North Dakota are seventh lowest in the country, and Xcel’s rates are slightly lower than the state average, he said.

“These low rates translate into average energy bills for North Dakota customers that are about 27% below the national average,” he said.

Xcel provides power to about 95,000 North Dakota customers. The company serves Minot, Grand Forks, Fargo, West Fargo and 34 other cities.

The proposed rate increase is distributed fairly equally among Xcel’s customer classes, although small business customers will see a somewhat smaller increase due to revenue coming closer to meeting costs in that class, Sederquist said.

Sederquist listed a number of reasons for the rate request:

– Investments in the distribution system that include a substation upgrade in Grand Forks in 2019; completion of relocating and replacing a underground cable; expanded use of automated distribution switching to reroute power during an outage; installation of lightning arrestors and fire resistant crossarms; a proposed expansion of the company’s vegetation management efforts to support additional field work and project design employees in North Dakota; and higher costs of contracted services for locating and marking underground utility infrastructure in construction areas. It includes investment in new automated meter reading technology and advanced grid intelligence and security to give customers improved communication about outages and access to more information about their energy use and available rate options.

– Shortening the life expectancy of two aging coal-fired power plants from 2034 to 2023 and 2026, which will increase annual depreciation expense by about $2.9 million.

– An adjustment in nuclear decommissioning costs collected annually from customers, which are deficient by $2 million.

– Power purchase agreements that require an additional $1.9 million.

– $1 million in higher technology costs and employee health care expenses.

– Systemic declines in electric sales in North Dakota due to Xcel’s limited service area growth opportunities and customer use of more efficient electric appliances, lighting and industrial equipment, which results in less ability to recover fixed costs of generating and delivering electricity.

Sederquist said sales peaked in 2014 and have dropped annually since. Lower sales are contributing about $2.7 million to the revenue deficiency, he said.

Earlier this week, the PSC took public comment on a $7.7 million rate increase request from Montana-Dakota Utilities for its North Dakota gas customers, including those in Minot. The average residential user would see an increase of $5.54 a month.

The PSC continues to take comments in both cases by email at ndpsc@nd.gov or by mail to Public Service Commission, 600 E. Boulevard Ave., Dept. 408, Bismarck, ND 58505.

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